Costs for building materials are going up and that, combined with the rising cost of building lots, means higher prices for new homes. / Getty Images / Brand X

Written by

Bill Lewis

For The Tennessean

It may seem contradictory, but as new home prices continue to go up across Middle Tennessee, builders have this advice for customers — there may never be a better time to buy than today.

The reason: Prices will only be higher tomorrow.

“If you’ve been waiting for a deal, you’ve missed your chance,” said Chad Ramsey, director of sales and marketing for the Pulte Group. “That doesn’t mean you’re not going to get a great new home at a good price, but not below cost.”

Home prices were stable for several years or even fell during the recession. They have been going up this year as builders pass along the rising cost of building lots and materials such as lumber and drywall. In addition, there aren’t enough homes on the market to satisfy demand, at least in the most desirable neighborhoods. The result is the perfect recipe for prices that seem to go up day to day.

Regent Homes President David McGowan said he recently offered some advice to a customer who was hesitating on the purchase of a $400,000 home.

“If you want to pay $10,000 more for the house you’re looking at, wait two months,” McGowan said.

Beth and Ryan LaBelle, who recently bought a house built by Celebration Homes in Mt. Juliet, are glad they didn’t delay.

“If we built the same house today, we would have probably added

10 percent,” Beth said.

The LaBelles discovered a silver lining in the dark cloud of rising prices. When they had their home appraised, its value had increased $6,000 over the purchase price, giving them instant equity.

Despite rising prices, Beth believes home ownership is a smart decision. Their mortgage payment isn’t much more than rent for the apartment where they briefly lived after moving to Mt. Juliet from Indiana.

“Prices are great, as are interest rates. And you can buy a really nice home for what you pay in rent,” Beth said.

The price of drywall and lumber has gone up as much as 25 percent this year, said McGowan. Concrete has gone up

6 percent. The price of those materials could come down as supplies increase. But building lots are scarce, and no one is making more land. That means higher prices.

A building lot in Murfreesboro that cost $45,000 two years ago costs $65,000 today. In Nolensville, lots that were $65,000 cost $80,000 now, he said.

Sometimes even finding a spot to build a house can be a challenge.

“Builders are fighting for lots,” McGowan said. “A few years ago we had lots left over from the recession. Not now. You go down to Franklin, you can’t even buy a lot.”

Citizens Homes President David Hughes predicted that consumers will experience “sticker shock” as scarcity drives up the price of lots.

“Lots that are in locations where people want to live will probably become a bidding war in the near future,” Hughes said.

Goodall Homes, which builds houses in Williamson, Wilson, Sumner and Davidson counties, has raised prices by 10 percent in some communities.

“You combine all that, that’s why prices are going up so significantly in the Nashville area,” Vice President Chris O’Neal said.

Rising prices are not discouraging buyers. For example, the Pulte Group expects to have well over 300 closings in the region this year.

“We sold out of some areas a little quicker than anticipated. That’s a good problem to have,” Ramsey said.

Goodall expects to build more than 300 homes this year, a record. Regent recently began work on 185 new condominiums at Lenox Village, its “smart growth” community on Nolensville Pike south of Old Hickory Boulevard. Citizens Homes is building in Antioch, Hermitage, Nolensville and Wilson County.

Prices are rising, but they are still recovering from the effects of the recession, Ramsey said.

“It may look like a price increase but they’re just getting back to where they were,” he said.

Hughes, the president of Citizens Homes, believes people who buy a home will profit from that decision. People who wait will have regrets.

“The people who have purchased a home in the last year and probably for the remainder of this year will probably see their investment grow dramatically,” Hughes said. “If interest rates start to jump up, then those fence sitters will be saying, ‘Man I sure missed an opportunity.’ ”

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Middle Tennessee home sales continued their torrid growth pace in May, according to figures just released by the Greater Nashville Association of Realtors.

Realtors closed 3,061 sales of existing homes during the month, 22.4 percent higher than the 2,500 closings in May 2012. It’s the 23rd consecutive month that sales exceeded year-ago figures by at least 15 percent, with year-to-date sales up 24 percent from last year.

May also was the first time that closings topped 3,000 in a single month in nearly six years. The last time it happened: August 2007, just before the housing slump took root.

“That’s a major milestone for our region,” said Price Lechleiter, the group’s president, in a statement.

But he again struck a cautionary chord, saying “while the signs are encouraging, they are far from solid.” He cited uncertainty about the availability of federal financing, the future of Fannie Mae and Freddie Mac and the potential changes to the mortgage interest deduction.

Another, more-pressing concern: Tight inventory. The number of homes for sales barely moved from April to May, and remained 14 percent below year-ago levels.

As a result, homes are selling faster and for more.

The median single-family sales price jumped $10,000 to $195,000 from April to May and by 9 percent in the past year, and homes sold in May were on the market an average of 73 days — more than a week shorter than earlier this year. A year ago, the median price was $179,000.

Condominium prices have risen even faster: From $160,000 per unit in May 2012 to $179,000 last month, a 12-percent jump.

2. Music can be played anywhere in the building, including at the Songwriters Hall of Fame, where visitors can listen to song catalogs of Nashville's acclaimed songwriters.

3. If convention organizers want to hang a car from the ceiling of the 350,000 square foot exhibit hall or drive one onto the stage of the Grand Ballroom, they can.

4. Music City Center includes seven outdoor locations for guests to look out over the city.Karl Dean also recommends the roosts as potential places to watch Fourth of July festivities.

5. Music City Center's kitchen, ledMax Knoepfel, can make 20,000 meals a day, if necessary.

6. Artwork inside includes "Euphony," by Ball-Nogues Studio, about 28 miles of yellow, red and blue beading that hangs about 117 feet long; and "Composition,"Aaron Stephan, which consists of a grid of more than 100 white musical instruments and hangs in front of the Demonbreun Street view.

7. The average size group at the existing convention center is 1,500, compared to 6,500 at the new center.

The Nashville Convention & Visitors Corp. has reported that 829,574 room nights tied to the center have been booked, short of its 1,000,000 room nights goal that had been set for its opening. Dean hinted there may be more to add.

"I can't think of convention centers that have opened with the numbers of conventions we have booked, the number of hotel rooms we have booked," Dean said on the tour today. "We'll have an announcement next week about exactly where we are. We are ahead of schedule. We'll be fine. It's going to be a big success."

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